eResearch Blog: Stock of the Week
Divcom Lighting Inc. (TSX: DVQ)
Lights! Camera! Action: Buy!
Current Price: $0.215
52-Week High-Low: $0.50 - $0.215
Initiating Report Price: $0.28 (July 4/07)
Initiating Report Target Price: $0.60
Hi-Lo since Initiating Report: $0.275 - $0.215
Divcom Lighting Inc. is a North American manufacturer of architecturally-designed energy-efficient lighting products for retail and commercial markets across Canada and the United States.
Approximately 44% of revenue is generated in Canada and 56% in the United States. Retail revenue constitutes about 80% and the industrial segment 20%.
The shares are down 23% since our Initiating Report of July 5, 2007. They have fallen from $0.28 to a 52-week low of $0.215.
We cautioned in our report, “The substantial softness of the new housing market in the U.S. may affect revenue growth in the short term.”
The Company said it best when they reported in their July 13th MD&A, “The looming construction and housing start slow-down in the United States has contributed to the decline of U.S. retail sales. Divcom also witnessed changes in the buying patterns of “big box” stores in the United States which has negatively affected the timing of U.S. order activity and, consequently, revenues.”
However, Divcom’s order backlog as at May 31, 2007 stood at $1.7 million, which compares to $1.2 million at the end of February. This should provide a strong platform for growth in third quarter revenues.
While fall-out sentiment from the sub-prime mortgage industry debacle will likely have some effect on all related industries and, therefore, companies, in our opinion, there is no change in Divcom’s positive fundamentals.
Although we are mindful of “being tarred with the same brush”, if we liked the stock at $0.28 in early July, we like it even more at $0.215 in early August, and look for buying opportunities on continued weakness.
Lights! Camera! Action: Buy!
Current Price: $0.215
52-Week High-Low: $0.50 - $0.215
Initiating Report Price: $0.28 (July 4/07)
Initiating Report Target Price: $0.60
Hi-Lo since Initiating Report: $0.275 - $0.215
Divcom Lighting Inc. is a North American manufacturer of architecturally-designed energy-efficient lighting products for retail and commercial markets across Canada and the United States.
Approximately 44% of revenue is generated in Canada and 56% in the United States. Retail revenue constitutes about 80% and the industrial segment 20%.
The shares are down 23% since our Initiating Report of July 5, 2007. They have fallen from $0.28 to a 52-week low of $0.215.
We cautioned in our report, “The substantial softness of the new housing market in the U.S. may affect revenue growth in the short term.”
The Company said it best when they reported in their July 13th MD&A, “The looming construction and housing start slow-down in the United States has contributed to the decline of U.S. retail sales. Divcom also witnessed changes in the buying patterns of “big box” stores in the United States which has negatively affected the timing of U.S. order activity and, consequently, revenues.”
However, Divcom’s order backlog as at May 31, 2007 stood at $1.7 million, which compares to $1.2 million at the end of February. This should provide a strong platform for growth in third quarter revenues.
While fall-out sentiment from the sub-prime mortgage industry debacle will likely have some effect on all related industries and, therefore, companies, in our opinion, there is no change in Divcom’s positive fundamentals.
Although we are mindful of “being tarred with the same brush”, if we liked the stock at $0.28 in early July, we like it even more at $0.215 in early August, and look for buying opportunities on continued weakness.
posted by Bob Weir at
11:04 AM
0 Comments:
Post a Comment
<< Home